“A better business plan is a firm base on which profitable house flipping ventures are built.” Than Merrill
To build a business plan for flipping houses, you should first understand what flipping is, how it works, what are its benefits, and what risks are involved in it. This blog will serve as a guide for you to create a well-organized plan for flipping houses that would help optimize ROI and enhance your earnings.
“Even a small-scale investment in real estate is a source of building cash flow and wealth of an individual.” Robert Kiyosaki
Wholesale real estate investing or flipping is a strategy used by the investors to buy a property with the intention of selling it instead of utilizing it. The aim is to buy a house at a lower price and sell it high to earn maximum profit. But it’s not always about the profit when you want to garner a steady income.
Golden Tip: While driving a house flipping business it is better to complete the transactions as quickly as possible instead of adopting a buy-and-hold strategy. Speed matters when it comes to accomplishing the goal of ending it, rather than maximizing profit.
Do you know? Almost 68,000 homes were flipped in the U.S. over the first quarter of 2024, so that alone makes it one out of every 12 homes sold, says the study by real estate data company ATTOM. In addition, according to ATTOM, the rate of gross profit earned by flippers on each deal typically exceeded 30%.
Table 1: Financial Metrics in House Flipping in 2024
| Metric | Value |
| Average Gross Profit per Flip | $73,500 |
| Average Return on Investment (ROI) | 30.4% |
| Average Time to Flip a House | 166 days (approximately 5.5 months) |
| Percentage of Flips Financed | 37% |
| Percentage of Flips Purchased with Cash | 63% |
Sources: FairFigure, The Motley Fool
Every business strategy has its own unique benefits but there is a certain amount of risk also involved in it. Here are some of the pros and cons of running flipping houses business:
Higher Profit Margin: As per ATTOM, the gross profit for house flips was $72,375 in the first quarter of 2024. It’s a fair amount but remember it requires extensive market knowledge and a better investment strategy.
Diversify Investment Portfolio: One of the efficient ways to mitigate risk is to invest in multiple assets. Real estate is one of the well-known long-term investments, which can be used as stocks and bonds alternatives. By adding real estate, you can diversify your portfolio and flipping houses allows you to cash in those investments.
Enhancing Neighborhoods: Flipping houses can help turn around property values in areas where neglected or derelict homes are dragging down prices.
A real estate investor, syndicator, and speaker, Matt Aitchison says, “Flipping houses can be financially draining. It’s essential to set aside some capital in case your flip is a flop.
Waste of Money: If you buy a house and it is not sold, you must pay all its costs, such as the property taxes, mortgage payment, insurance, and homeowners’ association dues.
Critical Problems: Before buying a home if you are unable to pinpoint the maintenance issues, documentation flaws, and other costly issues then you end up losing so much money. Flipping houses require a vast experience along with a curious eye to see house features minutely, avoiding key issues and optimizing your profit.
Legal Issues: Cash Home Buyers when buys a property with title problems or if buyer finds issues that you did not fix, these would always be situations of lawsuits.
Here is a list of mistakes you should avoid when thinking of flipping a house:
Curious about how to start a house flipping with no money or less investment – short response you need to reconsider this decision. In this business, you need a budget for property acquisition. Let’s say you are financing the acquisition so you should have an idea of interest rates.
Moreover, you need to spend money on repairs or cleanups to enhance curb appeal and you have to pay the property taxes or closing costs sometimes. For these expenses, you need money. So, if you plan to fix and sell a house for a profit, the sale price must exceed the cost of acquisition, renovation costs, and holding costs combined.
Time is crucial element of the house flipping business because it involves sourcing a suitable property, inspecting the condition of the house, attracting potential buyers, setting price based on expense analysis, and finalizing the deals and processing the paperwork. If you are a busy person who is stuck in many other businesses with less time to oversee this side job, it is not a clever idea to pursue this option because flipping houses business requires your attention.
Table 2: Average Time to Flip a House in the U.S. (2023-2024)
| Year | Average Time to Flip |
| 2023 | 178 days |
| 2024 | 166 days |
Source: FairFigure
Professional builders and construction workers, such as carpenters or plumbers usually do house flipping as a side business. They have over time acquired the knowledge, skills, and experience to find and fix a house. Some of them are unionized and thus get unemployment checks the whole winter while working on their side jobs.
But if someone doesn’t know a Phillips-head screwdriver from a flat one, then they must hire a professional to do the renovations and repairs. And that reduces one’s chances of making any significant profit from investment.
It’s important to build a highly skilled team, including a mentor, a real estate agent, a contractor, a home inspector, an attorney, and even an accountant. Without a team you can’t excel in your house flipping business.
Professionals wait for the right property, but novices rush out to buy the first house that they see. Then they hire the first contractor who makes a bid to address work that they can’t do themselves. Professionals either do the work themselves or rely on a network of prearranged, reliable contractors. So, patience is an important aspect to run a profitable flipping houses business.
From previous discussions you come to know that flipping houses, if planned properly, is a way to diversify your investment, earn a healthy income, and gain a comprehensive knowledge of the construction and real estate industry. A well-crafted plan serves as the key to achieving business success. Here are the key elements of a profitable business plan for flipping houses:
It is not a wise decision to initiate business without having prior knowledge of the market. If you are a real estate professional or a newcomer, it is the highly recommended step before starting the house flipping. It gives you the details of ongoing trends, property demands, and potential challenges in your targeted area.
Table 3: Best Places to Flip Houses in U.S. in terms of ROI (Q3 2024)
| Metropolitan Area | Average ROI |
| Ocala, FL | 141.5% |
| Pittsburgh, PA | 101.8% |
| Scranton–Wilkes-Barre, PA | 100.0% |
| Flint, MI | 98.9% |
| Columbus, GA–AL | 93.8% |
Source: The Motley Fool
In a business plan, usually an executive summary is written which highlights the business objectives, strategies, and the value proposition of the business. If you don’t want to dive deep, then all you need to do is establish realistic goals and then plan your resources accordingly. For example, initially just set a target to find and sell a property within two months at a certain profit level.
The next thing is how to achieve the set objectives or targets. You need proper resources to make it happen.
Define Pricing Guidelines: There is a rule named as 70% rule which states that an investor shouldn’t pay more than 70% of the After Repair Value (APR), excluding the cost of repairs.
Calculate your purchase price: Maximum Buying Price = (70% × ARV) − Repair Costs
When you acquire a property then the next thing is how to sell that property and attract potential buyers. Develop a plan to market your properties by utilizing digital platforms, real estate listings, and networking to engage suitable buyers and increase chances of sales.
Describe the types of properties you intend to purchase, renovate, and sell. Highlight any niche markets or unique selling propositions that differentiate your business.
Constantly analyze and discover potential risks and challenges, such as market fluctuations or renovation setbacks, and recommend mitigation strategies.
Creating a profitable business plan for flipping houses includes acquiring market knowledge, planning your resources properly, building a professional team, as well as setting pricing, sales, and marketing strategies. Although there are risks associated with this business but if you set clear goals and properly utilize your time and resources, this side job could result in a successful venture, earning you big dollars. Visit for more information our website Redhead Home Properties.
A robust plan includes market research, budgeting, funding strategies, property criteria, resource selection, and pricing tactics.
It varies but typically ranges from $20,000 to $50,000, depending on the market and renovation scope.
To increase your profit, you should focus on buying properties below market value, targeting high-ROI renovations, and anticipating repair costs accurately.
Yes, there are several options, such as personal savings, hard money loans, private investors, and home equity lines of credit (HELOC).
Few of the risks are market fluctuations, renovation delays, underestimated repair costs, and financing challenges.
